Gold: The Big Picture

Gold is the perfect anti-asset…anti-stocks, anti-bonds and anti-financial assets generally. When financial assets are strong, gold is generally weak and vice versa. When financial assets are highly valued, the smart contrarian play is to sell financial assets and buy gold. When gold is relatively highly-valued, the smart play is to sell gold and go long stocks. The correct measure is the relative value of these assets.

Let’s look at history. In January 1980, when gold hit $852 per ounce (an all-time high in inflation-adjusted terms of roughly $2,400), the ratio of the Dow to gold was 1.3. In other words, a unit of the Dow bought 1.3 ounces of gold. During the Great Depression, the Dow bought 1.9 ounces. That compares to a high of 44 in 1999 when gold reached lows of $250 an ounce while the Dow soared. When the nominal price of gold hit a record high above $1,900 in August 2011, the Dow to gold ratio was 6.4.

So, where are we now? The Dow to gold ration has more than doubled since 2011 to nearly 15. That means that despite its exceptional move in early 2016, gold is still cheaper in relative terms than it was for the 24 years between May, 1972 and September, 1996. On a relative basis, it’s the cheapest it has been since December, 2007. The conclusion? Sell stocks and buy gold.

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Who is Wayne Wile?

Wayne Wile is an international investment advisor with more than five decades of experience in wealth management. He has spent the majority of his career working with institutional and high net worth investors, seeking to mitigate risk while optimizing portfolio performance.

Wayne began work in the mailroom of a brokerage firm when he was 17 years of age and rose to a senior executive position. He was recruited for key jobs with several nationally recognized investment firms in Canada before striking out on his own.

Wayne’s methods as a trader are governed by simplicity and self-discipline. He says that losses are the children of greed and fear while profits are the spawn of patience and trend-following. “Time is always on your side. Let the market tell you what it wants to do and keep it company. Never chase an idea you think you have missed. There is always another one coming along.”

Wayne is especially opposed to sophisticated trading strategies that try to predict the future based on mathematical analysis of historical data. “These systems routinely destroy far more wealth than they create,” he says. “Only a highly intelligent, well-educated individual would be foolish enough to do this stuff. Successful traders need to stop analyzing and learn to listen to what the market is telling them every day.”

Wayne resides in the Cayman Islands but considers himself a citizen of the world.